Elliott Investment Management’s intentions on Scottish Mortgage Investment Trust PLC (LSE:SMT) became clearer over the weekend after the activist investor recently built a 5% stake in the FTSE 100 investment company.
According to a Sunday Times report citing a “source familiar with the matter”, Elliott wants Scottish Mortgage to ramp up share buybacks to close the stock’s discount, while paring down some private investments including Elon Musk’s SpaceX.
Sources said Elliott is concerned about the lack of transparency in Scottish Mortgage’s private investments, which have increased in proportion to listed stocks, potentially contributing to the lagging share price.
Though Scottish Mortgage’s shares have added 35% in the past 12 months, the discount to NAV remains more than 5%.
Alongside SpaceX, Scottish Mortgage’s unlisted investments assembled by fund management firm Baillie Gifford include TikTok parent ByteDance, US fintech firm Stripe and Swedish EV battery maker Northvolt.
Nabeel Bhanji, a partner at Elliott, told the Times: “We are grateful for the dialogue we have had with the board and management of Scottish Mortgage in recent months.
“We strongly support the company’s recently announced £1 billion buyback — the largest buyback programme ever announced by a UK closed-end fund — and look forward to continuing our engagement.”
Last year, Scottish Mortgage’s non-executive director Amar Bhidé resigned following a bust-up with the board over what he said was a lack of “capabilities and governance clout to be able to monitor the illiquid investments on which there is little audited information in the public sphere”.
Last week, the Financial Conduct Authority (FCA) said that it plans to visit some fund managers to check how they value unquoted assets.
FCA director Camille Blackburn told the Association of Investment Companies’ director conference that the regulator will choose “a few firms” and will “go in and ask about governance and some of the practices that they employ”. The outcome of this inspection will be provided at the end of the year, she said.
Source: Proactive
